Friday, December 21, 2012

Today we have added a new escrow feature to localbitcoins.com. This differs from the previous transaction feature by being completely designed only for electronic money transfers and not for physical cash trades.

The service requires that you have bitcoins in your localbitcoins.com wallet before you can start using it. The escrow service is disabled by default, and currently enabled only for selling advertisements.

The service generates reference messages automatically for the buyer, so that doing the trade is very easy for both the seller and buyer. The buyer has just to pay the invoice automatically generated by localbitcoins.com, and the seller must watch his bank/payment service account and release the funds when they are spotted.

Every trade builds up reputation for both participants. We always suggest to be cautious with first timers - in the bitcoin community, bank account hackers sometimes use services like localbitcoins.com to buy bitcoins. Therefore check the reputation of the counterparty when accepting bank transfers. Banks will notice these transfers usually pretty quickly, about in 0-3 days. With new users with no existing trade volume, it is recommended to wait or ask for additional validation before accepting the transfer.

Of course all the existing features of localbitcoins.com are also integrated with the new process, such as messaging, feedback and SMS/email notifications. You can also specify your price using equations, as before. Examples:

Wednesday, December 19, 2012

For all localbitcoins.com users, be very careful when using bank transfers. Localbitcoins.com hasn't been designed with bank transfers in mind in the first place, so we don't have infrastructure for it. Bank transfers can also be chargebacked/accounts frozen like with paypal or credit cards. There are some people using stolen bank accounts to purchase bitcoins from sellers, on localbitcoins.com

If you are going to sell bitcoins with bank transfers, check the profile/feedback beforehand. Watch out with new users. It doesn't hurt to wait or cancel the deal when unsure.

Tuesday, November 20, 2012

Physical cash is old and well-working concept. It has a good privacy model, it is relatively anonymous and it is easy and fast to use. Physical cash won't go away anytime soon, because it works so well.

However there are some problems, which might become bigger issues in the future. Central banks are always able to print physical money as much as they want, which will cause devaluation of physical cash for everyone. Additionally, even if you believe in central banks, private entities with skills and resources are able to print cash as well. In fact, there already exists counterfeit cash which even skilled experts can't distinguish from goverment-printed money.

Bitcoin solves effectively the counterfeiting problem, or so called double-spending problem. It also removes nicely the need to trust the central bankers. However, being a virtual currency, using bitcoins is often seen much more difficult than using cash or other traditional payment methods.

One nice concept around Bitcoin is a paper wallet. It allows anyone to store bitcoins on a paper, like physical cash. Unlike physical cash, bitcoin paper wallets aren't suitable for large-scale trade, but they have other useful applications:

Getting people introduced to bitcoins, a learning tool

Relatively secure way to store bitcoins - generate the paper wallets offline on a computer, print them out, and store them in a bank safe

Trade in high-trust environment, such as between friends and family

The simplest possible bitcoin bank note contains only the private key. You can derive the corresponding Bitcoin address from the private key. However usually it makes sense to include also the corresponding bitcoin address, to make usability easier.

Other than that, only the sky is the limit. Bitcoin paper wallets come in all sizes and forms, and it is also fairly easy to create your own design. You can store any amount of bitcoins on paper wallet - be it one million bitcoins or 0.00000001 bitcoins (one satoshi). You can also load them as you go - it might be useful to have receiving addresses in your wallet, just in case. You can store the private key somewhere else securely.

The best thing about bitcoin paper wallets is that they are not dependant on any of the running bitcoin services, except the bitcoin network itself. Even if invidual web sites come and go, the Bitcoin network highly probably will stay up and running, and you will be able to redeem your bitcoins even aften waiting 10 years.

Printing your own Bitcoin bank notes

Bitaddress.org provides easy way to print your own bitcoin cash. The steps are:

Start your web browser. Use incognito window or similar.

Go to bitaddress.org

Disconnect your computer from the internet

"Paper Wallet" -> "Print"

Clear browser cache and all private data, restart browser

Tinfoil hats will not be happy with these instructions, therefore I have included extra security cautions in the footnote [1].

After printing, you can apply some kind of tamper-evident sticker on top of the private key. Also one option is to laminate the wallets, as I did - it makes them more durable.

Creating your own custom design
Bitaddress.org is just a static html/javascript page, you can download it to your computer and modify the behaviour to match your requirements. The most obvious thing is to create your own design for the bank note.

This can be done with following steps:

Create your custom artwork with any program such as inkscape or photoshop

You can also replace the site logo (id logo), or localize the site to your own language. Then you can upload the html file to your own server, so anyone can use your design to generate bitcoin paper wallets.

Loading and redeeming paper wallets

Naturally any QR-scanning capable bitcoin wallet app can be used to load the paper wallet. Not all apps can be used to redeem the contents. Our easywallet.org web wallet can be used to sweep the transactions from the private key. It works on iPhone and Android, also with one-tap if configured properly. Easywallet.org doesn't import the private keys, it just sweeps the unspent transactions to the wallet address and after that forgets the private key.

Thursday, November 15, 2012

The International Restaurant Day is coming again on next saturday, and hundreds of small restaurants will be popping around the world. The event started from Helsinki, Finland, and has been spreading since then to new countries and cities.

For small-time restaurants, payments are always a problem. Cash is cumbersome, and it is hard to keep enough change for your customers. Accepting credit or debit cards is really expensive, and if you want to set up a temporary restaurant you usually don't want to invest in a credit card terminal.

Bitcoin is nice, because in addition to solving the central banking problem, it also fixes the change money problem, and also it is very easy to accept bitcoin payments. Below I will visit different ways to accept bitcoin payments from your customers.

Easywallet.org - probably quickest and easiest
All platforms: iPhone, Android, laptops, any device with a web browser
To set up accepting payments, just go to easywallet.org and the service will generate a random web address for you, which is the key to your bitcoins. Bookmark it, and you can start accepting bitcoins. The service supports currency conversions with 24h exchange rate, so you don't need to worry about the exchange rate, and the rate will be fair to both buyer and seller.

From your settings, turn off "Use Static Address". This way the service will generate new address each time you receive payments, allowing you to separate your customers more effectively.

To move your bitcoins elsewhere, you can use QR code scanner on iPhone and Android. You can also send the URL to your email, and handle cashing out from your computer.

Giving change as bitcoins
You have run out of pocket change and can't give your customer money? Maybe he/she will accept bitcoins. Print some paper wallets from bitaddress.org. When customer requests change, zap change amount worth of bitcoins to a paper, and give the paper to the customer. The customer can cash out his/her bitcoins from his computer at home.

Cashing out bitcoins to euros/dollars/fiat
There are lots of exchanges which allow you to convert your bitcoins to more traditional currencies. My favourite bank transfer-based exchange is bitstamp.net.

However, if you want to spur up the local bitcoin economy, look for a cash dealer at localbitcoins.com - you can also set up your own "selling bitcoins" advertisement, and help local people to get to know bitcoins a little better.

Hope everyone has a great Restaurant Day! If you consider accepting bitcoins and have any questions, send me an email to jeremias.kangas@gmail.com . Feel free to ask anything. Also if you will accept bitcoins on next saturday, give me a note - I can advertise your pop-up restaurant for free :)

Thursday, August 16, 2012

We have changed the name of the escrow feature to "LocalBitcoins Transaction" or just "Transaction" where the connection is obvious. We changed the name because it is not actually escrow service by the traditional definition, no disputes or resolution services.

Other terms:

"Transaction verify code": this is generated for the buyer. When the seller shows this code to the buyer, buyer can be 100% that funds have been released. The buyer should check that the code shown by the seller matches the code shown by localbitcoins.com"Transaction release code": the seller can release the escrow by sending this code to the number +16466994674 . This releases the funds to the buyer, and the seller should receive the verify code promptly, which he/she can show to the buyer.

The benefits of the service are:

- No internet connection needed - only one SMS-enabled phone required to make the transaction on the spot, or only one internet-connected laptop- Quick process - the buyer does neet any devices, just memorize/write down the transaction verify code- Allows the users to gain reputation via confirmed trades. If users use this service, we have a way to confirm that trade actually happened.

The LocalBitcoins Transaction service is not enforced in any way. You are free to create any kind of deal with the customer, use smartphone clients, laptops, whatever. We just recommend to use the transaction feature when the customer requests it - it should make the process much easier to the buyer.

Monday, August 13, 2012

We are really happy with the global reach localbitcoins.com has achieved in the short time we have been developing the site. It is nice to see, that we have advertisers now from even countries such as Ghana, Malaysia, Venezuela and Cambodia, where Bitcoin could be really useful.

We are very excited with the positive feedback we have received for the site, and we are working on new features full time. This week our goal is to make the site translation-ready, so we can start making the site more useful for people from non-english countries as well.

Thursday, August 9, 2012

EDIT 16.8: Please note that we rebranded the service from "escrow" to "LocalBitcoins Transaction" or short "Transaction". This is because the service is not actually an escrow service. It is just a tool to make the exchange process easier.

Cash is a perfect method for buying and selling bitcoins. Paypal and credit cards have chargebacks, and are practically unusable for bitcoin transactions. Bank transfers are slow, and take away your privacy by enabling the bank to see all your transactions.

However there are lots of hurdles when trying to enable local bitcoin-to-cash transactions. What kind of devices you want to use, what kind of internet connection, how many confirmations should you wait, and so on. We try to remove all these hurdles with our SMS-based bitcoin escrow service. Only the seller needs sms-enabled phone, and the buyer doesn't need phone at all! So even internet connection isn't needed at the meeting point.

The process for the buyer is following:

Make offer/receive offer

Memorize or write down the escrow verify code

Bring the cash to agreed location

When seller shows you the escrow verify code, you can be sure that the funds have been transfered to you

For the seller the process is almost as easy:

Receive offer/make offer

Write down the escrow release code and phone number as a SMS message, don't send yet

When the buyer brings you the cash, send the release code as SMS

You should receive the verify code as a SMS, which you can show to the buyer

The SMS should work 99,99% of the time - we have two different backends, so that if one fails, we will use the other. Also we have enabled the SMS messages in 150 countries - you should be able to use this process practically anywhere in the world.

If there are some problems, you can always head to the nearest internet cafe, and check the situation online. However, we are pretty confident, that practically in all cases the SMS escrow process should work easily, and the transaction time could be less than a minute.

Also if the seller works for at example internet cafe, even the sms sending is not needed - you can just release the escrow online, and you will receive the code with you can prove that the escrow has been released.

Here are couple funny visualizations of the process (however note that since these, the process has been simplified):

Wednesday, August 8, 2012

Now it is even easier to minimize your risk when selling/buying bitcoins on localbitcoins.com, while still giving a competitive price. We added possibility for min/max -functions. For example, the following equation gives pretty competitive price when you want to sell in EUR:

max(max(mtgoxusd_high*USD_in_EUR, EUR_24h), intrsngeur_high)

Or if you want to buy in USD:

min(mtgoxusd_bid, USD_24h)

Not that these functions always require excatly two parameters.

We hope that with these advanced pricing functions people are more comfortable doing bitcoin OTC trades, with fixed prices.

Saturday, August 4, 2012

We just have made it possible to connect your bitcoin-otc account to your localbitcoins.com profile. Only the bitcoin address authentication support is currently enabled. However, it is trivial to add a bitcoinaddress to your bitcoin-otc profile.

If you already are authenticated on bitcoin-otc using bitcoin address, just go to your localbitcoins.com profile and follow the instructions. It should me less than 5 minute process, if you are using the standard bitcoin client.

If you are using only gpg authentication, you can easily enable bitcoin address based authentication with the following commands to the gribble bot:

After adding the bitcoin address, just go to your localbitcoins profile and follow the instructions. Essentially you sign the message provided by localbitcoins.com, and via that action you can prove that you are have the access to the specified bitcoin-otc profile.

Why to connect your bitcoin-otc profile to localbitcoins, then? You get all your bitcoin-otc feedback listed in your localbitcoins.com profile, which will add your credibility. Also you will get some nice badge to your listings in the future (we haven't yet implemented this).